A court in the Southern District of New York (“SDNY” or the “Court”) recently released an important decision applying the Supreme Court’s landmark Escobar ruling to a qui tam action involving percentage fee arrangements for billing agents. Among other claims, the City of New York (“the City”) and its billing agent, Computer Sciences Corporation (“CSC”) allegedly used an illegal incentive-based compensation arrangement for CSC’s services when billing New York Medicaid for services provided to eligible children under New York’s Early Intervention Program (“EIP”). EIP provides “early intervention services” to certain children with development delays using federal funds provided under the Individuals with Disabilities Education Act. EIP allows municipalities like the City to pay providers directly for EIP services and then seek reimbursement from other payors, like third party payors and New York Medicaid.
Laurence Freedman is a member in the Washington, DC office. Larry’s health care and life sciences litigation practice focuses on defending clients against allegations and investigations of fraud and abuse involving governmental programs. He is highly experienced in representing clients against actions brought by federal and state agencies including the US Department of Justice (DOJ), the Department of Health and Human Services Office of the Inspector General (HHS OIG), the United States Attorneys’ Offices, and state OIGs and Medicaid Fraud Control Units (MFCUs).
Last week, the Department of Justice (DOJ) entered into a $34 million settlement with Mercy Hospital Springfield (“Hospital”) of Springfield, Missouri, and its affiliate Mercy Clinic (“Clinic”). The settlement resolves an allegation that the Clinic violated the Stark Law by compensating twelve Clinic physicians in a manner that took into account the volume and value of the physicians’ referrals to the Hospital’s infusion center. The U.S. contended that the defendants’ Stark Law violations caused their reimbursement claims to Medicare for infusion services to violate the False Claims Act. Continue Reading Hospital and its Clinic Agree to $34 Million Settlement to False Claims Act Allegation that Compensation to Oncologists Violated the Stark Law
In a closely watched False Claims Act (“FCA”) case, the Fourth Circuit Court of Appeals decided that the Department of Justice (“DOJ”) has an unreviewable right to object to a proposed settlement agreement between a relator and a defendant when the Government has declined to intervene in the case. United States ex rel. Michaels v. Agape Senior Community, Inc., No. 15-2145 (4th Cir. Feb 14, 2017). In addition, as most expected, the court declined to decide the legal issue whether FCA plaintiffs may rely on statistical sampling of claims to prove FCA liability and damages, concluding that it had “improvidently granted” an interlocutory appeal of the lower court’s ruling on the use of statistical sampling. This decision thus leaves intact the district court’s decision that rejected the relator’s proposed use of statistical sampling to prove FCA liability and damages. The Fourth Circuit’s decision not to address the use of sampling in FCA cases leaves many open questions. Continue Reading Fourth Circuit Permits DOJ to Reject an FCA Settlement, But Punts Decision on Statistical Sampling
Last month, the U.S. District Court for the District of Utah joined the AseraCare court and others in finding that a relator cannot successfully allege violations of the False Claims Act (“FCA”) based on a purported lack of medical necessity unless there is an objective standard articulated by Medicare. In fact, District Judge Jill Parrish cited the AseraCare case and many federal appellate decisions when granting dismissal – with prejudice – in United States ex rel. Polukoff v. St. Mark’s et al., No. 16-cv-00304 (D. Utah 2017). Continue Reading Another Court Agrees That A Difference Of Opinion On Medical Necessity Is Insufficient to Show Falsity Under the False Claims Act
While 2016 marked one of the least productive years in the history of Congress, the same cannot be said of health care enforcement and regulatory agencies. Perhaps motivated by the impending change in administration, these agencies promulgated a number of notable regulations in 2016, including:
- A Department of Justice (DOJ) Interim Final Rule that significantly increases penalties under the False Claims Act (FCA), making already high stakes litigation even higher.
- An Interim Final Rule from the Office of Inspector General for the U.S. Department of Health and Human Services (OIG) and other agencies increasing civil penalties for violations of various statutes and regulations, including the Civil Monetary Penalties Law (CMPL) and its implementing regulations.
- A Final Rule that addresses the OIG’s expanded authority under the CMPL.
- A long-awaited Final Rule from the Center for Medicare & Medicaid Services (CMS) concerning the “60 Day Rule” for returning overpayments.
- A Final Rule from the OIG that amends the safe harbors under the federal Anti-Kickback Statute (AKS) and adds exceptions under the CMPL’s beneficiary inducement prohibition.
Below we discuss the highlights of each rule and how we expect each to impact the enforcement environment in 2017 and beyond. Continue Reading Health Care Enforcement Review and 2017 Outlook: Significant Regulatory Developments
Last month, we reported on a Massachusetts federal court jury’s decision to acquit the former CEO of Warner Chilcott in one of the first prosecutions of a health care executive following the Department of Justice’s (“DOJ”) Yates Memo. Last week, another Massachusetts federal court jury acquitted two more former health care executives of felony charges following another closely watched post-Yates-Memo prosecution. This time, the jury found William Facteau, the former CEO of Acclarent, and Patrick Fabian, Acclarent’s former Vice President of Sales, not guilty of 14 counts of felony fraud related to Acclarent’s off-label promotion of a medical device (although the jury did find them guilty of related misdemeanor charges). Continue Reading Another Jury Acquits in One of the First Few Prosecutions of Health Care Executives Following DOJ’s Yates Memo
On June 30, 2016, the Senate Finance Committee’s Republican staff issued a 20-page report discussing comments made by industry stakeholders after a December 2015 round-table on the future of the physician self-referral law, also known as the Stark law. Unless an exception is met, the Stark law prohibits physicians from referring patients to facilities in which they have an ownership interest or compensation arrangement. Originally targeting the overutilization of physician-owned clinical laboratories, the Stark law has expanded to prohibit the referral of a wide range of “designated health services.” The law’s complexity has created what one Fourth Circuit judge described as “a booby trap rigged with strict liability and potentially ruinous exposure.” This is compounded by the fact that, as noted in the staff report, the Stark Law has been enforced primarily through the False Claims Act (“FCA”), thus imposing treble damages and penalties on the amounts paid by Medicare from any prohibited referral.
But most would agree that the Stark law has been a booby trap for years. Two developments explain the Committee’s recent motivation. Continue Reading Senate Committee Releases Report on Potential Stark Law Changes, Hearing Scheduled
On May 6th, we posted about the possibility that the Department of Justice (“DOJ”) might dramatically increase False Claims Act (“FCA”) penalties after the Railroad Retirement Board (“RRB”) nearly doubled the per-claim penalties it imposed under the FCA. After nearly two months of anticipation, DOJ published an Interim Final Rule yesterday announcing that it intended to increase the minimum per-claim penalty under Section 3729(a)(1) of the FCA from $5,500 to $10,781 and increase the maximum per-claim penalty from $11,000 to $21,563. These adjusted amounts will apply only to civil penalties assessed after August 1, 2016, whose violations occurred after November 2, 2015. Violations that occurred on or before November 2, 2015 and assessments made before August 1, 2016 (whose associated violations occurred after November 2, 2015) will be subject to the current civil monetary penalty amounts.
The penalty increases proposed by DOJ are the same as those proposed by the RRB back in May. The RRB’s increase resulted from a section of the Bipartisan Budget Act of 2015, called the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (the “2015 Adjustment Act”), which required federal agencies to update civil monetary penalties (“CMPs”) within their jurisdiction by August 1, 2016. The 2015 Adjustment Act amended the Federal Civil Penalties Inflation Adjustment Act of 1990—which is incorporated into the text of the FCA—and enacted a “catch-up adjustment.” Under the “catch-up adjustment,” CMPs must be adjusted based on the difference between the Consumer Price Index (“CPI”) in October of the calendar year in which they were established or last adjusted and the CPI in October 2015.
DOJ last raised the civil penalty amounts under the FCA to their current levels in August 1999, but because the 2015 Adjustment Act repealed the legislation responsible for the 1999 adjustment, DOJ looked back to 1986 when civil penalties were set at a minimum of $5,000 and a maximum of $10,000. This calculation resulted in a CPI multiplier of more than 215% resulting in the new minimum per-claim penalty of $10,781 ($5,000 x 2.15628) and a maximum per-claim penalty of $21,563 ($10,000 x 2.15628). Under the 2015 Adjustment Act, the increases are required unless DOJ, with the concurrence of the Director of the Office of Management and Budget, makes a determination to increase a civil penalty less than the otherwise required amount. As to the FCA civil penalty, as well as scores of other civil penalties under DOJ’s jurisdiction, DOJ declined to seek this exception.
DOJ is providing a 60-day period for public comment on this Interim Final Rule. Like the rest of the health care industry, we will be watching closely to see if commenters are able to convince the Department to reconsider these astronomical penalty amounts.
Much like the rest of the health care world, we have been following the AseraCare case since May of last year when the Alabama federal district court granted AseraCare’s motion to bifurcate its False Claims Act (FCA) trial into Phase I that would address “falsity” and Phase II that would address “knowledge” and other FCA elements. In October, the jury sided with the Department of Justice (DOJ) and qui tam relators in Phase I and found that Medicare claims submitted by the provider of hospice and palliative care services for 104 patients were objectively false. Yesterday, the district court granted summary judgment in favor of AseraCare on the basis that the government’s proof on the falsity element fails as a matter of law. The court held that if “all that exists is a difference of [medical] opinion,” there can be no “falsity” under the FCA.
In this case, relators (and DOJ in intervention) accused AseraCare of overbilling Medicare for hospice services by hiding information from physicians in order to obtain certifications of hospice eligibility from those physicians for patients who were not terminally ill. To establish that AseraCare had falsely certified patients as eligible for hospice care, the court found that DOJ relied upon the opinion of a single medical expert who reviewed the patient files and determined that those records did not support the certifications at issue. Continue Reading Judge Sides with AseraCare, Grants Summary Judgment in $200 Million FCA Case
On February 26, 2016, a federal jury in Texas returned not guilty verdicts with respect to charges brought against Vascular Solutions Inc. (“VSI”) and its CEO by the U.S. Department of Justice (“DOJ”), dealing a decisive blow in a case brought before the Yates Memo was issued but touted even then as an effort to enforce corporate and individual accountability. Continue Reading Acquittals in Vascular Solutions Case Deal Setback to DOJ